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Income Tax Appellate Tribunal, ‘D’ BENCH : CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI INTURI RAMA RAO]
आदेश / O R D E R
PER INTURI RAMA RAO, ACCOUNTANT MEMBER
These are appeals filed by the Assessee directed against order of the Commissioner of Income Tax –I, Chennai dated 09.02.2012 passed u/s.263 of the Act and Commissioner of Income Tax (Appeals)-13, Chennai (‘CIT(A)’ for short) dated 01.12.2017 for the Assessment Year (AY) 2002-2003.
Since, the identical facts and issues are involved in these 2. appeals, we proceed to dispose the same vide this common order.
For the sake of convenience and clarity, the facts relevant to the appeal in for assessment year 2002-03 are stated herein.
4. The assessee raised the following grounds of appeal:
‘’1. The Order of the Commissioner of Income Tax, Chennai-I, dated 29.03.2012 passed under Section 263 of the Income Tax Act, 1961 is without jurisdiction, erroneous, against the provisions of law and contrary to the facts and circumstances of the case.
The Commissioner of Income Tax should have found that except the Market development expenses amounting to Rs.82,55,3221- which was disallowed by the Assessing Officer and the sum of Rs.19.64 lakhs being interest not debited in the books but claimed as deduction under the Mercantile system of ITA Nos.1185-12, 1503-18 :- 3 -:
accounting, all the other issues dealt with by the Commissioner in his Revision Order under Section 263 of the Act, do not arise out of the order of the Assessing Officer dated 30-12-2009 passed under Section 143(3) of the Act read with Section 147 of the Act.
3. As far as the interest of Rs.1964 Iakhs is concerned, the Commissioner of Income tax erred in revising the issue under Section 263 of the act since the Assessing Officer has after considering the detailed submissions of the appellant in the reply submitted to him, has accepted the contention of the appellant and dropped the proceeding in the light of the decision of the Supreme Court of India relied upon by the appellant (82 ITR 63 &135 lTD (2012), 233.
As far as the amount written off as bad debts concerned, the Commissioner of Income tax should have found that this issue does not arise out of the order of the Assessing Officer dated 30-12-2009 passed under Section 143(3) of the Act read with Section 147 of the Act and hence, cannot be considered in a revision proceedings enunciated with reference to the said Order.
5. Without prejudice to the above contention, in any case, the Commissioner of Income tax should have found this issue of bad debts written off stands squarely covered by the decjsion of the Supreme Court of India in the case of Vijaya Bank (323 IRE 166-SC) wherein it has been held that in writing off of debts as bad, crediting individual debtors is not mandatory. Malabar Industrial Company Limited Vs Commissioner of Income tax (243ITR 83), Commissioner of Income tax Vs G.M Mittal Stainless Steel Private Limited (263 ITR 255) and Commissioner of Income tax vs MAX India Limited (295 ITR 83(SC).
6. As far as the writing off of stock as obsolete is concerned, the Commissioner of Income Tax should have found that when the stocks are written off as absolute, they cease to be stock in trade and hence, the proposition canvassed by him for revising the assessment under Section 263 of the Act does not apply to the assessee’s case’’.
ITA Nos.1185-12, 1503-18 :- 4 -:
The brief facts of the case are as under:
The appellant namely M/s. Gangadharam Appliances Ltd, is a company incorporated under the provisions of the Companies Act, 1956. It is engaged in the manufacture and sale of pressure cookers, pan, vacuum flasks and other utensils. The return of income for the AY 2002-03 was filed on 30.10.2002 declaring loss of Rs.7,35,60,900/-.
Apparently there was no scrutiny assessment. The return of income was processed u/s.143 (1) of the Act on 17.07.2003. Subsequently, the Assessing Officer had come to know that assessee claimed interest expenditure of Rs.19,64,437/- which is not provided in the books of accounts and made a claim of marketing development expenditure of Rs.2,22,11,254/-. Based on this information, the Assessing Officer issued reassessment notice u/s.148 of the Act on 27.03.2009 proposing to reopen the assessment up calling upon the assessee to file return of income. Assessee vide letter dated 16.04.2009 submitted that original return of income filed be treated as return of income in response to notice issued u/s.148 of the Act. Against the said return of income the assessment was completed by the Assistant Commissioner of Income Tax, Company Circle II(2), Chennai (hereinafter referred as ‘’the Assessing Officer) vide order dated 30.12.2009 passed u/s.143(3) r.w.s. 147 of the Act at total loss of Rs.6,53,05,577/-. While doing so, the Assessing Officer disallowed
ITA Nos.1185-12, 1503-18 :- 5 -: marketing expenditure of Rs.82,55,322/- by holding that assessee had failed to substantiate that this expenditure was incurred for the year under consideration. Subsequently, ld. Commissioner of Income Tax (the ld. CIT) on suo-motu examination came to know that assessment is erroneous and prejudicial to the interest of the Revenue as the Assessing Officer had not examined the following issues.
‘’a) The loss on sale of asset amounting to Rs.1,52,775/- has not been added back, though the same remains in the capital field. b) Failure to consider Rs.19.64 lakhs being the interest payments claimed in the statement of total income but not provided for in the accounts since the ITAT has upheld the disallowance of this interest for A.Y. 2003-04. c) Failure to add back the incorrect write off of bad debts of Rs.345.60 lakhs, debited to the P/L account on reconciliation with the books of the associate company for the F.Y. 2001-02 d) Failure to disallow the incorrect claim of bad debts when the individual debit balances of those accounts have not been written off to the extent of Rs.70.48 lakhs and e) Disallowance of loss on valuing the obsolete stock at market value by which an amount of Rs.123.84 lakhs has been written off’’.
Accordingly, the ld. CIT, Chennai-I, Chennai vide order dated 29.03.2012 passed u/s.263 of the Act set aside the reassessment order with the direction to the Assessing Officer to redo the assessment in accordance with law.
ITA Nos.1185-12, 1503-18 :- 6 -:
Being aggrieved, the assessee is in appeal before us in the present appeal. The ld. Authorised Representative contended that the ld. CIT ought not have assumed jurisdiction u/s.263 of the Act, in as much as, the Assessing Officer had conducted necessary verification on the issues which are sought to be revised by the ld. CIT. Further, ld. Authorised Representative contended that it is not the case of CIT that no enquiry was carried by Assessing Officer and therefore the ld. CIT ought not have exercised jurisdiction u/s.263 of the Act.
On the other hand, the ld. Departmental Representative placed reliance on the orders of the lower authorities.
We heard the rival submissions and perused the material on record. Admittedly, one of the issues which are sought to be revised by the ld.CIT is issue of addition on loss of sale of asset of Rs.1,52,775/- and assessee himself agreed for revision during the course of revisionary proceeding before ld. CIT, therefore, it would render the reassessment order erroneous and prejudicial to the interest of the Revenue so as to enable the ld. CIT to exercise the powers of revision u/s.263 of the Act. Even in respect of other items, which are sought to be revised by the ld.CIT, the ld. Authorised Representative could not substantiate before us that the Assessing
ITA Nos.1185-12, 1503-18 :- 7 -:
Officer had carried necessary enquiries on the issues. In the circumstances, we uphold the validity order of passed u/s.263 of the Act Thus, the appeal filed by the assessee in for assessment year 2002-2003 stands dismissed.
Now, we take up 9. year 2002-2003.
Pursuant to the order passed by the ld. CIT-I, Chennai dated 29.03.2012 u/s.263 of the Act, ld. Assessing Officer passed assessment order u/s.143(3) r.w.s. 263 of the Act on 14.03.2013 after making following additions.
Loss on sale of assets : 1,52,775 Interest payments : 19,64,000 Incorrect write off of bad debts : 3,45,60,000 Incorrect claim of bad debts : 70,48,000 Loss on valuing obsolete stock : 1,23,84,000
During the course of assessment proceedings pursuant to the direction of the ld. CIT in the order u/s.263 of the Act, the assessee company had not furnished any information before the Assessing Officer and accordingly, the Assessing Officer made the above additions.
Being aggrieved, an appeal was preferred before the ld.CIT(A) who vide impugned order dismissed the appeal of the assessee, since assessee had failed to substantiate the claim.
ITA Nos.1185-12, 1503-18 :- 8 -:
Being aggrieved by the order of the ld. Commissioner of Income Tax (Appeals), the assessee is in appeal before us in the present appeal. The ld. Authorised Representative contended that ld. Commissioner of Income Tax (Appeals) had dismissed the appeal on the wrong assumption that the order of the ld. CIT is not an open remand to the Assessing Officer. Therefore he submitted that the matter may be remanded back to the file of the ld. Commissioner of Income Tax (Appeals) for fresh adjudication in accordance with law
On the other hand, the ld. Departmental Representative placed reliance on the orders of the lower authorities.
We heard the rival submissions and perused the material on 15. record. We find merit on the submissions made by the assessee.
Accordingly, we remand the issue back to the file of the ld.CIT(A) for fresh adjudication in accordance with law. Thus, the appeal filed by the assessee in 2002- 2003 is partly allowed for statistical purpose.
To summarize the result, the appeals filed by the assessee 16. in for assessment year 2002-2003 stands
ITA Nos.1185-12, 1503-18 :- 9 -: dismissed, whereas 2002-2003 is partly allowed for statistical purpose.
Order pronounced on 14th day of October, 2019, at Chennai.